Uphill task to restore confidence in Thailand

Thai protesters shout slogans and hold placards beneath a portrait of King Bhumibol Adulyadej during a rally against the military junta at Victory Monument in Bangkok, Thailand, on 26 May 2014. -- PHOTO: EPA

By Nirmal Ghosh Indochina Bureau Chief In Bangkok

THAILAND'S military junta, while tough on critics, has vowed to restore sagging confidence in the country, reassuring investors and appeasing the powerful rural lobby by paying farmers the money they are owed from the previous government's failed rice purchase scheme.

Saying the army had learnt from the past, junta supremo Prayuth Chan-ocha, speaking in a televised address to the nation yesterday, warned that daily protests against last Thursday's coup would be dealt with firmly.

He also appealed for support and cooperation in running a country that has been brought to the brink of recession by more than six months of political turmoil, amid scepticism that military rule is a solution.

Taking care to project competence and a sense of direction, General Prayuth said that while government ministries will now report to the military, they will not be dealing with only soldiers, but also appointed specialised advisers and consultants.

Yesterday, the military administration started paying rice farmers, the money coming from the 40 billion baht (S$1.5 billion) in reserves from the bank funding the scheme. It will also borrow 50 billion baht to make up the shortfall.

Calling the move an astute one politically, analysts say it will ease the anger of some 800,000 rice farmers who are owed a total of 90 billion baht.

On the tax front, the administration will extend corporate, income and valued-added tax rate cuts due to expire this year, and proceed with unspecified projects under a US$61 billion (S$76.4 billion) infrastructure plan, said Mr Somchai Sajjapong, head of the Finance Ministry's fiscal policy office, after a meeting with Air Chief Marshal Prajin Juntong, who is in charge of the economy.

Some projects under a 350 billion baht water management scheme will also be implemented, he added, expressing confidence that the economy would grow more than 2 per cent this year.

Still, it remains an uphill task to restore confidence in the economy against a backdrop of political volatility and scepticism that the army can run a civilian administration. "The economy faces tough challenges in the short term, due to the reduction of tourist revenues, the prolonged pause of international business transactions, and dampened domestic consumer confidence," warned Professor Pavida Pananond of Thammasat Business School.

"The longer-term outlook for the Thai economy looks equally, if not more, daunting. The coup did not end or solve the ongoing conflict. On the contrary, the potential backlash will likely lead to more instability and unpredictable outcomes - not an environment in which business can prosper," Prof Pavida said.

A Democrat Party politician bitterly opposed to former premier Thaksin Shinawatra, whose network is now the target of a widening purge, said: "It is clear that everything is still unsettled."

Defending Gen Prayuth's refusal to commit to a timeframe for new elections, he added: "If he gives a timeframe, the countdown begins, people's expectations rise. That was one of the lessons learnt from the 2006 coup."

While noting that the King's endorsement legitimised Gen Prayuth's rule, Professor Pavin Chachavalpongpun of Kyoto University also underlined the potential for more turmoil, evidenced by continued pro-democracy protests in downtown Bangkok.

"If the military continues with repression, the regime may not last," he warned.